PETALING JAYA: The upcoming Budget 2020 will emphasise on new growth measures to address the high cost of living issue and improve the purchasing power of Malaysians, particularly the Bottom 40 (B40) segment, according to TA Securities.
As such, the government is expected to be flexible in its fiscal approach and emphasise domestic activities.
“Budget 2020 is expected to continue providing sizeable allocations for the transportation, housing, healthcare and education sectors. This should translate into more road projects, enhancement of ports and airports, government-aided housing schemes, construction of new hospitals and more schools in the rural areas.
“Allocations to improve facilities and infrastructure in Sabah and Sarawak could increase due to increasing demand from these states, especially with the latter heading for a state election in 2021, ” said TA Securities in a Budget 2020 preview note.
Socio-Economic Research Centre executive director Lee Heng Guie concurred, noting that initiatives to address consumer spending could entail direct cash assistance to the B40 segment, a special cash assistance of RM500 to RM1,000 for the 1.6 million civil servants, as well as a review of the personal income tax rate.
“This is to ensure that the middle and high-income earners do not hit the highest tax rate bracket so quickly in addition to rewarding productivity and boosting consumption.
“As for housing, there should be an enhancement of end-financing facilities for affordable homes besides the review and consolidation of various affordable housing programmes like PR1MA to enhance the delivery outcome, ” he said.
Lee added that the government must be pragmatic and flexible in recalibrating the real property gains tax (RPGT) in times of lacklustre property market conditions, against the backdrop of a weakening economic and business environment.
This could include the abolition of the 5% RPGT on the disposal of property after the fifth year, the extension of the National Home Ownership Campaign until Dec 31,2020 and stamp duty exemption, as well as reviewing the threshold for foreign purchase of properties.
Foreign purchase of properties only accounted for 0.3% to 1% (706 to 2,406 units) of the total properties transacted between 2012 and 2016.
Following the revival of mega-projects like the East Coast Rail Link, Budget 2020 may include the relaunch of previous projects such as the mass rapid transit three and Bandar Malaysia.
TA Securities expected Budget 2020 to be expansionary with an expected allocation of RM240.7bil, including a gross development expenditure of RM56bil, which is on par with the 2019 allocation.
This will lead to a fiscal deficit of 3.2% in 2020, as compared to a projected 3.4% in 2019.
“Excluding the RM30bil in special dividend from Petroliam Nasional Bhd in 2019, revenue collection in 2020 is expected to increase by 3.8% to RM240.7bil, aided by higher direct taxes from the growing economy and improved tax collection methods, and indirect taxes such as the sales and service tax, e-commerce and the digital service tax, which will take effect from Jan 1,2020, ” said TA Securities.
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